Private sector set to enter Indian aerospace market

The first 16 aircraft are to be bought off-the-shelf under the project, while the rest 40 will be manufactured in India to replace the ageing Avro fleet of IAF.

NEW DELHI: The Modi government is all set to kick-start private sector entry into domestic aerospace arena by giving the green signal to the Rs 13,000 crore project to supply 56 transport aircraft to IAF.

The project was put on hold by the previous UPA regime last year after the then heavy industries & public enterprises minister Praful Patel and some others strongly opposed the move to virtually keep state-run units or PSUs like Hindustan Aeronuatics (HAL) out of the mega programme.

The Defence Acquisitions Council, to be chaired by defence minister Arun Jaitley on July 19, will "ratify" the decision taken to extend the date for submission of bids by foreign aviation majors to August 28. "The in principle decision has already been taken after the law ministry's clearance," said a source.

The first 16 aircraft are to be bought off-the-shelf under the project, while the rest 40 will be manufactured in India to replace the ageing Avro fleet of IAF. The tender or RFP (request for proposal) was issued in May 2013 to over 10 global aviation majors like Embraer, Lockheed Martin, Airbus, Ilyushin, Casa, Saab, Alenia Aeronautica and STE Ukraine, who are to choose their partner or the Indian Production Agency (IPA) based on qualification criteria stipulated in the tender.

The stalled project is considered crucial for the private sector to get a major foothold in the country's floundering defence production sector, which has largely remained the public sector's preserve so far.

India still sources over 65% of its military requirements from abroad, earning the dubious distinction of being the world's largest arms importer. Since he took over as PM on May 26, Narendra Modi has repeatedly stressed the need for a strong domestic defence-industrial base.

The transport aircraft project held PSUs like HAL -- which has a virtual monopoly in the domestic military aviation arena - could not be the "lead agency'' in the programme. HAL, after all, already had "numerous" projects on its plate ranging from production of Sukhoi-30MKI fighters, Tejas light combat aircraft and upgrades of MiG-29s and Mirage-2000s as well as proposed ones like the almost $20 billion MMRCA (medium multi-role combat aircraft) project to acquire 126 Rafale jets. Moreover, after meeting the military requirement, the selected IPA could even manufacture the aircraft for the civil aviation sector.

But in October 2013, Patel had written to then PM Manmohan Singh and defence minister A K Antony to demand that PSUs should get "equal opportunity" and "a level-playing field" in the project. That, in effect, held up the entire endeavour.